Morgan Stanley is, reportedly, planning to slash the compensation of its financial advisers as part of its drive to trim down staff costs across the organization, according to Reuters.
James Gorman, chief executive of Morgan Stanley, said he wants to pay 55% or less of wealth management revenue to brokers, 5% points down from the current 60%.
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Based on a revenue projection from Bernstein Research, the move would save the firm US$884 million in costs next year.
AS a part of the new strategy, the company management is mulling changes at the margins: cutting pay for brokers who generate the least revenue, and slashing the money it sets aside to lure experienced new hires, according to Reuters.
However, no final decisions have made though executives have been hashing out possibilities for the 2015 broker pay plan in recent weeks, the report added.
"There are some functions you don’t need to continue to put money into as the revenue line grows, as we become bigger, as we are more selective on recruiting and we have less attrition," Greg Fleming, president of Morgan Stanley Wealth Management, told Reuters in an interview.
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By GlobalDataAccording to Reuter, Morgan Stanley’s executives are also trying to ensure they incentivize the brokers to do the right thing for customers and the firm.
The bank is hoping to reduce the commissions brokers get to simply buy and sell securities, and to instead encourage them to offer more holistic financial advice.
Fleming, who is responsible for hitting the target, told Reuters he can get there not by cutting pay, but by growing revenue through products like loans, and by being more careful not to spend too much on bonuses for new advisers.
